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London's Sky-High Real Estate
May Damp Its Competitiveness

Updated Jan. 23, 2007 12:01 a.m. ET

House prices in prime areas of London and New York are booming compared with the U.K. or the U.S. in general. The reason is obvious: Both financial centres -- the City of London and Wall Street -- are flourishing. And investment bankers and hedge-fund managers have a strong desire to live in the same top areas: Belgravia, Chelsea and Notting Hill for London; the Upper East Side and Greenwich Village in Manhattan.

But London is pulling away. Last year, prices in its plush SW1 postal code (which covers Belgravia) grew 29%. In...